Tip #3 – Build in flexibility
I have learned that my daughters often “forget” their money when we are out shopping and need to “borrow” from me—money that never seems to get repaid. To cope with this, I have created “Good as Cash” certificates. Each certificate has a denomination, $5 or $20 for example, that the girls get as gifts along with cash. I actually keep these certificates in my wallet and when they are caught short, I offer them as an option. This is my way of making the act of “borrowing” money from me feel concrete. The certificates, I have found, are harder for them to redeem than if I just loan them the money. It also helps us all keep track of how much was borrowed.
In addition, each month, I have a “date” with each of my daughters. Each gets me exclusively for the day and we dispense with the rules. This generally means that we find ourselves at Target getting toiletries that I pay for. This helps build in breathing room to their budgets while they learn to manage the allowance.
The bottom line: this is about teaching kids. We are not trying to build a portfolio of stocks for them or amass enough savings for a down payment on their first house. As parents, we should instead stay focused on teaching them to make money choices so that they will develop the skills that eventually will allow them to become financially responsible adults.